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Page added on February 28, 2009

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Mexico’s Oil Challenge Rises with New Output Drop

Doubts are growing that Mexico can halt a four-year decline in crude oil production after its January oil output slumped to a more than 13-year low, due to bureaucratic delays and technical challenges.

Crude output in Mexico, a top U.S. supplier, dropped 9.2 percent year-on-year in January to 2.685 million barrels per day, its lowest level since November 1995 and just below state oil company Pemex’s 2009 target of 2.7 to 2.8 million bpd.

Pemex’s assurances it can halt the slide — the result of a failure to prepare for the decline of the huge Cantarell oil field — and waning volumes risk hurting government coffers just as the economic downturn bites.

Crude oil revenues, which fund a third of the federal budget, have been shielded by hedges from plunging global oil prices this year and further helped by the slide in the peso against the dollar. But the hedge expires at the end of the year and analysts see production volumes slipping lower.

Cantarell was Mexico’s crown jewel for years, pumping more than 60 percent of the country’s oil, but output has slumped by nearly two thirds since a 2004 peak of just over 2 million bpd. New projects aimed at making up the gap are moving slowly.


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